2009 (12) TMI 174 - AT - Service Tax

Cable operator services- Appellant is a Cable Operator and he was distributing cable services provided by City Cables Services. Cable Operator services became taxable with effect from 16-8-2002. On 10-9-2003, premises of the appellants was searched and appellant was advised to pay service tax. The appellant paid service tax along with interest. In October 2005, show-cause notice was issued proposing the demand of service tax treating the taxable service tax receipts as more than Rs. 11 lakhs and in the first round of litigation the matter was remanded to the Original Adjudicating Authority by Commissioner (Appeals) to recalculate the taxable service receipts. Thereafter, the taxable receipts was recalculated as Rs. 8,04,848 and on this amount total amount of service tax payable by the appellant amounting to Rs. 47,298 with interest as applicable has been demanded and penalties under various sections of the Finance Act, 1994 have been imposed. Held that- The Cable Operator Service was brought into service tax category with effect from 16-8-2002 and appellant being an operator as only distributor of cable service provided by City Cables, the claim that they were under the bona fide belief that they would not be liable to pay tax, cannot be held to be totally wrong. Under these circumstances, I agree with the learned advocate that no penalty was imposable. In view of the above observations, the matter is remanded back to the Original Adjudicating Authority, who shall allow the appellants to take copies of customer service cards, prepare the work-sheet card-wise and submit evidence to the department as to the actual taxable receipts and based on that the demand for service tax as well as interest shall be recalculated. The penalties imposed on the appellant are set aside. Appeal is allowed by way of remand in terms of above observations.

Summary

Issues:
Taxability of cable operator services, calculation of service tax liability, suppression of facts, applicability of penalty provisions, opportunity to prepare worksheet based on customer service cards.

Analysis:
The case involved a Cable Operator distributing services provided by City Cables, which became taxable from 16-8-2002. Following a search in 2003, the appellant registered and paid service tax based on their calculation of taxable receipts at Rs. 5,52,900. A subsequent show-cause notice in 2005 proposed a higher tax liability, leading to litigation. The matter was remanded to recalculate taxable receipts, resulting in a demand for Rs. 47,298 plus penalties.

The appellant argued they had no intention to evade tax, believing they were not required to register initially. They promptly paid the calculated amount post-search but lacked detailed customer service card copies for accurate calculation. The appellant contended no suppression occurred, invoking provisions of the Finance Act, 1994, for conclusion of proceedings without further notice. The Revenue argued the appellant had ample opportunity to calculate and pay correctly, emphasizing the second round of litigation and rejecting claims of missing customer service cards.

The Tribunal found merit in the appellant's arguments, noting their willingness to pay promptly and register, despite discrepancies in the initial calculation. Acknowledging the lack of detailed worksheets, the Tribunal directed the appellant to prepare a worksheet based on customer service cards to determine actual taxable receipts. Considering the appellant's compliance and the bona fide belief regarding tax liability, the Tribunal set aside penalties and remanded the matter for recalculation of tax and interest based on the revised worksheet. The appeal was allowed for remand in line with these observations.